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Morning NOTE

20 July 2022


The ZAR remained in its wide range, however trading from the weaker side ahead of today’s CPI tomorrows MPC meeting.


  • The Rand retreated from an intra-day high of 16.9500, before opening at 17.1200 this morning.
    • The local unit ignoring the return to risk, after risk assets rallied across the board.
  • The SP500 rallied to set a new 6 week high.
    • The broader market following the tech heavy Nasdaq higher, after Netflix shares surged almost 8% in extended trading.
    • The streaming service reported a loss of only 970,000 subscribers in Q2 , less than half of the 2 million it previously predicted.
    • The Dollar retreated as traders exited the safe haven currency and ploughed into stocks and risk assets.
  • The ZAR however not benefitting from the change in sentiment.
    • Traders nervous ahead of today’s SA CPI as well as tomorrows SARB MPC rate decision.
    • In addition, a bit of political uncertainty also making the rounds as ANC presidential candidates continue to announce their intention to combat the incumbent Cyril Ramaphosa.
    • Ramaphosa has also been called to answer questions in parliament around the burglary at his farm and the stolen foreign currency.
  • The ZAR struggling at the open against this back drop as we head towards the 17.1500 (pivot), middle of the range.

On the data front :

  • Today :
    • 10h00 SA CPI inflation. Expected +7.2% Yoy vs previous 6.5%
  • Thursday :
    • 14H15 : ECB rates decision. Expected +0.25% vs 0 previous. (talk of 50 bps also making rounds).
    • 15h00 : SA Reserve bank interest Rate decision. Expected +50 bps (repo to 5.25%) and prime to 8.25%.
  • Today :
    • This morning we opening weaker ahead of the CPI release.
    • The ZAR has ignored the risk rally ahead of the CPI today and MPC decision tomorrow.
      • Although we remain range bound within 17.3000 – 16.8600.
        • Once again opening inside the range i.e. (17.1200).
      • CPI risk could see a spike either way, but higher than expected could confirm the SARB stance for higher rates.
      • This would be supportive of the local unit, due to the  carry advantage.
  • USDZAR :  Expect a range 16.9500-17.2300
    • Importers 17.0500-16.9500
    • Exporters 17.1500-17.2300 
  • EURZAR :  Expect a range of 17.3000-17.6600
    • Importers 17.4700-17.3000
    • Exporters 17.5500-17.6600
  • GBPZAR :  Expect a range of 20.3600-20.6900
    • Importers 20.4600- 20.3600
    • Exporters 20.6000-20.6900


  • USDZAR 17.1200
  • EURZAR 17.5100
  • GBPZAR 20.5600


  • Ramaphosa under renewed pressure over Phala Phala farm theft as Public Protector subpoenas him.
    • Acting Public Protector Kholeka Gcaleka will subpoena President Cyril Ramaphosa to answer questions about the Phala Phala burglary. EWN
  • As the energy crises continues, Eskom says it is not trying to disincentivise people from opting for solar PV.
    • News emerged that the SOE has proposed users of Solar, could pay over R900/pm
    • DA MP Kevin Mileham criticised Eskom for effectively punishing homeowners and businesses seeking to install solar power systems.
    • He said,  “This is regressive and negates every claim that the government has said about opening up the grid to independent power producers,” News 24
  • Petrol price drop?
    • The Central Energy Fund, said there’s a chance petrol prices could fall between 53c and 60c per litre, depending on the grade of fuel.
    • Diesel could be reduced by around 28c. They did however add, that is if  “…the oil price and rand exchange rate remain at current levels for the rest of the month…”
    • After much pain at the fuel pumps, there’s a chance that South Africans will finally get a break next month. Fin24
  • Some positive news ;
    • After the Springboks clinched the series vs Wales on Saturday, the Proteas unexpectedly beat England convincingly in the first ODI.
    • SA 333/5 in 50 (Van der Dussen 134, Markram 77, Malan 57)
    • England 271 in 46.5 (all out ).  EWN


  • US stock futures edged up in Asian trade on Wednesday as stronger-than-expected corporate earnings lifted market sentiment and drove equities higher.
    • Tech-heavy Nasdaq 100 futures jumped 0.4%, while Dow and S&P 500 futures each gained about 0.2%.
    • Netflix the key driver pushing the tech heavy Nasdaq higher.
  • In regular trading on Tuesday, the Dow gained 2.43%, the S&P 500 advanced 2.76% and the Nasdaq Composite rallied 3.11%.
    • The three major indexes all closed above their 50-day moving averages for the first time since April on the back of upbeat earnings and a weaker dollar.
    • Investors now look ahead to more earnings reports later this week, including from Tesla, United Airlines, Snap, Twitter and Verizon, among others. CNBC


  • The US10 YT traded at 3.01%, as investors remain cautious ahead of next week’s FOMC meeting.
    • The story however remains the continued inversion of the yield curve with the 2YT trading at 3.20% vs the 10YT at 3.00%.
    • An inversion has traditionally been seen as a pre-cursor to a recession.
    • In a normal environment, long rates are usually higher than short rates.


  • Annual producer inflation in Germany slowed to a three-month low of 32.7% in June of 2022 from May’s record peak of 33.6% and below market forecasts of 33.9%.
    • Energy prices remained the biggest upward contributor (86.1%).
    • BUT…Excluding energy, producer prices climbed 5.5% from a year earlier.
  • However, in the UK , the annual inflation rate increased to 9.4% in June of 2022.
    • It was the highest rate since 1982 and slightly above market forecasts of 9.3%.
    • Biggest price pressure came from cost of motor fuels which increased at a record 42.3%
    • It was  the largest monthly rise on record since at least 1990.


  • The Dow gained 754 points to 31,827
  • The SP500 added 105 points to 3,936
  • The Nasdaq rallied 353 to 11,713

Futures Trading:

  • image : Trading economics


  • Asian markets all higher following Wall Street’s stellar performance.
    • In Japan, the Nikkei 225 rallied 2.67% to 27,680, and in turn closing at its highest levels in over a month.
      • Advances were mostly in technology stocks after Risk sentiment improved this week.
      • Traders scaling back bets for a bigger US rate hike and upbeat corporate earnings allayed fears of a sharp economic slowdown.
    • In Australia, the ASX 200 jumped 1.65% to 6,759 and in turn closing at its highest level in over three weeks.
      • The entire market rising following strong overnight gains on Wall Street.
      • Risk sentiment improved this week as investors scaled back bets for a bigger US rate hike and upbeat corporate earnings allayed fears of a sharp economic slowdown.
      • However, RBA Governor Philip Lowe warned of upside risks to inflation and related expectations.
      • He maintained that a steady increase in interest rates are required in the months ahead.
      • Technology stocks led the advance, with gains from Megaport (23%). Reuters
  • Crude oil declined to trade at $102.8/bl.
    • Prices falling after rallying for three straight days. The US benchmark lower as industry data indicated a rise in US crude inventories.
    • The reasons were looming risks of a demand-sapping global recession.
    • API data released Tuesday reportedly showed that US crude stockpiles expanded by almost 2 million barrels last week while gasoline holdings also rose.
    • Growing concerns that a global fight against surging inflation would lead to a recession and hurt energy demand also continued to pressure oil markets. Energy News
  • Gold flatlined around $1,710/oz but remained close to its lowest levels in almost a year.
    • The prospect of aggressive global monetary tightening dented bullion demand despite recent weakness in the dollar.
    • The Federal Reserve is on track to raise interest rates by another 75 basis points next week.
    • In addition, the ECB and SARB are considering a bigger 50 basis point rate hike on Thursday to get ahead of inflation. Kitco metals
  • The US dollar
    • The dollar declined to 106.5 as expectations of a supersized 100 basis point rate hike at next week’s Federal Reserve meeting ease.
    • The US central bank is on track to raise interest rates by another 75 basis points next week after pushing back against expectations of a bigger full percentage point increase.
    • Meanwhile, European Central Bank officials are considering a bigger 50 basis point rate hike on Thursday to get ahead of inflation, according to a Reuters report.
  • The Euro gained more than 1% to above $1.0250.
    • The single currency was trading at its highest level in two weeks, after reports that ECB policymakers will discuss a bigger 50bps rate hike at Thursday’s meeting.
    • The central bank is highly expected to start raising rates for the first time in over a decade and market consensus is pointing to a 25bps hike.
    • However bets on a bigger 50bps increase have risen recently as inflation heats up.

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